Tuesday, September 30, 2014

Women in business leadership.

Are they the better choice for CEO’s in modern companies?

It may be a subject best addressed by someone other than of my generation and gender. And if so, perhaps it should have been written in August, which was women’s month and a time when debate on the subject was more topical.

I’ll leave those questions as rhetorical, save to say that even the question in the sub-headline smacks of gender discrimination and perhaps explains my procrastination and sensitivity to the subject.

A large number of our generation could have touched the hands of those born at a time when women were not allowed to vote. In my youth there was a fine dividing line between chauvinism and chivalry; between patronage and patronizing; between protectiveness and being patriarchal and being the provider or controller. Even today, those distinctions are vague and confusing.

At that time there were no women underground, in defence force combat and in the police force. It was rare to be attended by a women doctor or dentist. I remember as a cadet reporter in the Johannesburg news office of the SABC, witnessing the appointment of the first women reporters in broadcasting in South Africa. The paradigm that by their very nature, men were providers and women carers was firmly rooted in the functions open to the sexes in society. It was reflected starkly in many institutions including religion, politics and economics. When it came to business, there was little question that boys made the better bosses.

So it may have surprised many that this old born chauvinist at an open event some years ago posed the very question in the sub-headline. I may have been speaking to the gallery because it was at my book launch organised by a women’s organisation. But by then, I had developed a strong conviction that the aggressive, predatory and macho-male patriarchal business model based on survival behaviour was causing marginalisation in society. Business, I argued even then, was far more suited to an empathy model because of its dependence on serving markets, customers, and the goodwill of society as a whole.

Apart from the list of women entrepreneurs who had made their mark globally, there was evidence of a growing preference for women in executive positions, a trend that seems to have increased as shown by this Moneyweb Article by Reuters which argues that “companies can't afford not to have women on their boards”.

In retrospect my argument was perhaps half-baked if not flawed. It was a simple extrapolation of the predominant view that men are providers and women are carers that led to an assumption that the predominant basic instinct in men is survival and in women empathy. Therefore if business should be based on empathetic behaviour, it is more suitably led by women.

The first challenge is to the stereotyping itself: are women more empathetic than men? Well, latest research tends to support this. Neurological experiments have shown (see article here) that women’s brains are indeed wired differently from men and their mirror neuron response is greater than their male counterparts.

Mirror neurons and the more recently discovered anterior insular cortex are features of our species that account for empathy far greater than that found in other creatures on earth.

The second challenge to the hypothesis is perhaps more serious: whether having a greater empathy instinct in women and a greater survival instinct in men will determine their predominant behaviour, and also whether this will be the most apropriate behaviour in all circumstances.

This clearly is not so. Our basic instincts, whether survival or empathy always have to be tempered by rational thought. Without this, empathy will be little more than an impulsive, emotional, perhaps hysterical response that could be counterproductive and even self-destructive – for example a heavily clothed person jumping into deep water to save someone drowning; or giving an addict a fix because you feel his suffering. An impulsive survival response, whether flight or fight, could be equally inappropriate – such as shooting through a bathroom door at an unknown or imagined assailant on the other side.

It is then self-evident that either gender can adopt the most appropriate response -- empathy or survival – in a given situation simply by rational thinking. This in turn means that we will adapt, even counter instinctively, to what the situation requires. If the predominant business behavioural model is survival, one could speculate that business would naturally lean towards the appointment of men in executive positions, whereas women would tend to suppress their empathy instincts and emulate survival behaviour to reach those positions.

So the question is not whether women are better suited to lead business, but whether business is best suited to have them lead. When the model changes, and it surely has to and will, then women could very well become better candidates for business leadership.

Thursday, September 25, 2014

Labour lawlessness.

The case for holding Union leaders accountable for violence and intimidation.

If someone who has a grudge against you says “If you don’t do as I say, I’ll find you in the shebeens. I’ll come to your home,” it is blatant intimidation and tantamount to extortion. Yet this is what Zwelinzima Vavi, the reinstated General Secretary of the country’s largest Labour umbrella organisation (Cosatu) did in support of actors fired from the SABC soapie, Generations, after a pay dispute. According to this report in Channel24 he went on: “"Don't cross the picket line. Don't make yourself scab labour. Don't add salt to the wound," adding that the names of those auditioning for the series would be made public.

It always amazes me that in collective coercion little thought is given to the rights of the individual who may want to work for whatever reason but whose rights are simply trampled on for what is perceived to be “the greater good”. The slogan “an injury to one is an injury to all” then rings hollow.

I’m not sure what motivated Vavi to make such threats publicly and in a live broadcast of an open media conference. Perhaps he needed to flex his muscles and beat his chest after the embarrassing events that led to his suspension. Perhaps too, Cosatu wants to whip up a frenzy amongst their red shirts, in response to the more radical presence of AMCU’s green shirts – all reminiscent of the behaviour of the brown shirts, or Hitler’s storm-troopers.

We know that there is a fine dividing line between striking, marching, picketing and intimidation. Just as fine is the line dividing that from violence, disruption and property destruction. One tiny step further and you have bodily harm and death. A few leaps further and you have a Marikana. We are a violent society and for too long we have tolerated violence when it is perpetrated by angry collectives such as protesting communities or striking workers. Not only is it difficult to identify the perpetrators within the pack, but seldom are they then held fully accountable.

Just as questionable is the involvement of those who hide behind the collective flag, those in leadership positions who are quick to condemn overt acts of destruction and violence, but conveniently ignore the atmosphere they themselves create through incitement and rabble rousing. This alone should mean that they cannot escape some accountability for the routinely tragic, destructive and disruptive outcome of most industrial action in this country.

Labour has many valid and long standing grievances. Not only is this broadly acknowledged and understood, but it is also shared to a greater or lesser extent by a large section of the working population. What has not helped the labour cause at all is the contextualising of these grievances into outdated ideological conflict and cold war rhetoric. That cause is tarnished further by a callous disregard for two highly significant victims of their actions – consumers and the unemployed. What is at issue is not labour’s cause, but its actions.

Regular readers of The Human Touch will be aware that I have been an avid champion of labour as statistically the biggest contributor to the creation of wealth. Of course, that is labour in the broader sense and not restricted to the emotive term of “the working class”. Most people are “workers”, or doers who find more meaning in being that than in being owners or “employers”. Many are both.

Those categorisations, including that of “capital” serve only to institutionalise individuals into abstracts; enhancing divisions and conflict and indeed denigrating the vital role that labour plays in the creation of wealth. It’s an environment that not only encourages the formation of combative collectives, but the emergence of megalomaniacs jockeying for power to lead them, whatever side they represent. What routinely escapes them all is that you can never enhance your value and indispensability to an activity by withholding your contribution from it.

I have spent some fifteen years closely engaged with workers at all levels and in many different companies in enhancing their understanding of the economic environment and the companies they work for. The key stumbling block in achieving a sense of common purpose and common fate is the commodity expression of labour, particularly at lower levels. This expression inevitably leads to the routinely destructive haggling about benefits and rewards, and a complete alienation of labour’s contributory role to the common purpose of serving customers upon which wealth creation to the benefit of all so self-evidently rests.

Perversely, that common purpose is mostly fully understood, endorsed, sometimes even championed at an individual worker or manager level. But when they become absorbed into a collective called a Union or “employer”, or worse still the abstracts of “labour” and “capital” that enthusiasm morphs into becoming a belligerent battle between claimants of wealth distribution. It’s a familiar battleground that both sides seem to prefer, and that fuels ambitions for power.

There is little need in this article to repeat the many economic analyses that have shown indisputably that labour unrest and disruptive industrial action are severely harming our economic well-being. It has again been highlighted in the recent Global Competitiveness report (see Moneyweb report here.)

Far from behaving like proud contributors to wealth creation, Labour has become South Africa’s economic Achilles heel. And there’s a highly poisoned arrow of self-destruction heading straight for it.

Tuesday, September 9, 2014

Convenient collectives

Hiding behind a collective flag to avoid personal accountability.

Much has been written in law and organisational theory about responsibility, accountability, and liability. While I am not an expert in the subject both in practice and theory, I cannot help concluding that for the most part we still have not got it quite right. It is the failure of the theory to insist that when someone or something is responsible for an action or event they also have to be held accountable and liable for that event or act. To the extent that when ordinary folk are confronted with at times dire consequences of the actions of others or groups of others, they are left with a deep sense of injustice.

So when Deputy President Cyril Ramaphosa told the Marikana commission that there was a collective responsibility for the tragic event 2 years ago, it left one with an immediate sense that in the end no single person or even a number of individuals would, or could be held accountable. The Commission is still some distance away from compiling its final report, and it is still to be seen whether it will identify specific individuals who can be held accountable. To then establish liability will be a near impossible task.

African Bank is another recent convenient collective that comes to mind. To be sure, former CEO Leon Kirkinis, shareholders and perhaps a number of employees have suffered or may still experience financial losses. But how does this compare with the dire position many of the borrowers find themselves in or will have to face in future? In most cases, when the interests of the collective collides with that of the individual, the latter is the loser both in terms of relative loss, and also in ability and capacity to engage the collective, establish full accountability and seek retribution or compensation.

All of this should imply a strengthening of the principle of caveat emptor, or “let the buyer beware”. But that principle becomes sterile as collective power becomes more centralised and commands far more influential, collusive, and persuasive resources to seduce the individual into a lop sided transaction. Even more invidious are transactions backed by cartels, price fixing and uncompetitive behaviour of which we have seen many such as the bread price collusion some years ago.

Such behaviour makes more rules, regulations and government involvement inevitable, leading to an individual clamouring for greater protection, bigger government and more policing. Which then raises the question: “who watches the watcher?” There cannot be a greater impediment to trust and social cohesion in South Africa than the appalling lack of government accountability. To many the protector has become the predator; the shepherd the wolf. The lack of accountability, which should be reinforced with appropriate liability at all levels of government, is the root cause of corruption and a major contributor to the pervasive civil unrest we have been experiencing for some decades.

When collectives behave badly or even merely seemingly inappropriately, other collectives are formed to engage them. The most significant and one of the oldest is in labour which dates back to the industrial revolution in the late 18th century.

Most modern societies have come to accept labour collectives in the form of Trade Unions as essential in balancing power between employers and employees. While in one sense one could argue that they represent little more than a cartel of workers, the three main constituents of capital, labour and government, have endorsed and entrenched their existence and rights as being beneficial to all.

But this should never imply escape from accountability and liability for their actions. This is one of the most critical economic issues our time. Not only have we become known as the strike nation of the world, but labour unrest has in too many cases led to violence, deaths, wanton destruction of property and severe disruption of the lives of ordinary citizens. So far, there has been no major case where we have seen the collective, let alone individuals, being held accountable or liable for this destruction. Refuge is simply sought under a collective flag, and accountability attributed to uninvited hooligans and gangsters.

Then we have the random, smaller or communal collectives of vested interests, who similarly seem able to escape accountability and liability for acts of destruction and disruption. The latest case in point is the taxi driver protests in Cape Town, where buses have been torched and one life lost. (See eNCA report here.)

Much of this is self-evident and has been for some time. But perhaps the real root of the problem lies at a much deeper level. We have to confront the question whether we as a nation and more so than many others, have become far too tolerant of the principles of self-gain and self-interest; of the view that the world owes us a living; and of acceptance of dependence on others.

The axiom that our true value lies in our capacity to make a contribution to others applies as much to a group as it does to an individual. Business fits perfectly in this paradigm. Even a young child wanting to trade marbles discovers very quickly that in a commercial sense supply cannot exist without demand. It’s a small leap from there to understand that supply exists because it serves demand, and from there to define service as its true purpose. Rewards that flow from it within the natural laws of legitimate transaction are an affirmation of that purpose. The motives of labour and capital are actually irrelevant to that existential reality, but they clearly become counter-productive and self-destructive when they deviate from it.

The purpose of government and all in it is even more clearly defined as being service. Involvement for material self-gain is patently an abomination that cannot be countenanced.

Apart from NGO’s and service organisations, these criteria are arguably less applicable to other collectives and groups of vested interests. They are mostly formed with the specific aim of serving their participants. But when this service implies a coercive and extortive claim on others a benign activity becomes malevolent and socially destructive. Another dimension these collectives often lose sight of and do not explore enough, is that empowerment is about enabling participants to make a contribution to others, to contribute to them and not claim from them.

Collectives are simply that – a group of individuals pooling resources and efforts for a common good. When that “good” is understood to be about making a contribution to the world around them, it is both empowering and enabling. The opposite is true when that purpose is simply for self-gain and self-enrichment in the exploitation of others.

In reality, there is no such thing as “collective responsibility”. It all starts at an individual and personal level with each accepting accountability for themselves and their actions.

The question is simply are they willing and are they able?

Wednesday, September 3, 2014

Defining the entrepreneur

Why dictating their role or purpose is presumptuous.

Imagine a stubble-bearded young consultant sitting opposite a Bill Gates, Steve Jobs, Anton Rupert or Henry Ford and trying to define a job description for him. Worse still, having the “suit” approach him with preconceived ideas about what the job description should look like and being armed with a clipboard with forms where boxes have to be ticked.

That scenario is not much less ludicrous than the assumption that the role or purpose of an entrepreneur is to maximise return for the shareholders. It is a bit like the staff of Moneyweb saying that the role of the sun is to provide them with light and heat. We have become used to what is often perceived as shareholder arrogance, basking in the concept of shareholder supremacy and the Holy Grail of shareholder value.

This view, and indeed the assumption that all shareholders are singularly focussed on maximum returns in the shortest time possible, ignores the fact that there is no single standard shareholder. Their involvement in companies and hence their behaviour and expectations can differ markedly between the single majority shareholder, shareholders directly involved in operations, institutional investors and many others. We also tend to forget that the shareholder value obsession, highly contaminated with short term thinking and speculative trading, has featured only in the past four decades or so and that great entrepreneurial achievements have flourished since long before then, often enough in highly socialist environments.

Good entrepreneurs will ensure good returns for investors. But that is not their job. Rather it is the job of a good investor and his advisors to identify and support good entrepreneurs in the pursuit of their visions and dreams. It was something that John Sculley, former CEO of Apple found out in the demotion/firing of Steve Jobs from Apple and the latter’s subsequent triumphant return. Sculley later confessed that he did not then understand the entrepreneurial mind-set, and wished he had. Forbes Magazine (see article here) quoted him as saying: “I didn’t appreciate, coming out of corporate America… what it meant to a founder, the creator of the Macintosh, to be asked to step down from the very division that he created to lead the very product that he believed was going to change the world.”

This is not to say that the entrepreneur, or what I have previously defined as the real creators and builders in business, do not have a duty to investors who have provided capital in good faith. The question is whether this ranks higher than the regard they have to have for customers, employees and society as a whole. It is completely unproductive to champion one over another, yet that is the very essence of the debate. So prioritise we do, and I have always championed customer supremacy. Those who say that the interests of all of the parties are synonymous do so mostly on outdated theory and are either out of touch with the economic reality of our times or are wilfully ignorant.

The Sculley/Jobs confrontation is an interesting case study of the difference between the entrepreneur and professional managers who today have become mostly the custodian of narrow shareholder interests. Given Jobs’ return to Apple and guiding it into becoming the world’s biggest company (more recently the second biggest by market capitalisation) it is easy to assume that Jobs won that confrontation outright.

But Forbes’ assessment is less harsh on Sculley, and concludes that without Jobs’ absence Apple would have been worse off. The pity was that the confrontation developed into something of a turf war with constant head butting that prevented some form of reconciling creative genius with a practical mindset.

Jobs’ treatment by the board, his return and the eventual ousting of Sculley himself, poses an interesting question of who shareholders should trust the most, the leader with entrepreneurial flair and societal and consumer market impact, or the professional executive singularly focused on increasing shareholder value. The view that the former can be replicated in the latter simply by dishing out a parcel of shares and offering remuneration equalling, if not sometimes exceeding the rewards of the former is patently misguided. For one thing, the remuneration criteria for executives are largely focused on shareholder value and maximum shareholder returns, and not on the criteria that excite most real entrepreneurs, creators and builders.

With entrepreneurial genius comes the courage, if not the right, to dictate to shareholders how the company should be run. As Liberty Founder Donald Gordon is reported to have once told a disgruntled shareholder: “I know better what to do with your money than you do! And if you disagree there are many in this audience who will be just too keen to buy your shares from you!”

Among all of the definitions of an entrepreneur, one will not find a remit to ensure maximum return on capital. A World Economic Forum report has defined entrepreneurship as “the pursuit of opportunities beyond the resources you currently control.” This fits in with my own understanding of an entrepreneur as being one who has the ability to look beyond immediate and guaranteed self-gain. That is what risk is about. Clearly that ability will be shackled by an absolute insistence on defined short term returns on capital.

Perhaps Time Magazine said it best some years ago: “The creating part of capitalism is the part that economic laws cannot explain. Like a code writer and his code, inspiration and dedication stand outside the system to which they are so crucial.”

In all of my experience with and reading about great business leaders, those entrepreneurs who not only made a huge difference to our lives, but also generated much wealth for themselves and those who invested in them, I have yet to come across one that professed to have been singularly and unambiguously driven by creating maximum shareholder value.

That happened in the pursuit of other far more exciting and meaningful things.